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Active market players include central and commercial banks, and major brokers. They are also called market makers.
Passive market players are called market users: they can only use market services and cannot set prices.
Major banks make a massive impact on markets by selling and buying huge volumes of currency.
Central banks are regulatory authorities which set key interest rates. In some cases they are entitled to perform exchange market interventions to weaken or strengthen a national currency.
The most part of currency operations is convened by commercial banks at their own expense and for the account of their customers.
Market makers quote currency rates for other market players. They own hefty assets and directly influence the rate-making. Market makers include the following banks: Deutsche Bank, Mizuho Bank, Barclays Bank, PBS, Citi Bank, Chase Manhattan Bank, and Union Bank of Switzerland, etc.
Export and import companies are market players as well. They use international exchange mechanisms in their business activities and are both major providers and consumers of foreign currencies.
Insurance and investment funds manage asset portfolios, provide hedging (protect positions from potential losses), and make profit from purchase and sale of assets.
Brokers are mediators providing customers with access to foreign exchange market (Forex). They contribute to trading between sellers and buyers. Carrying out activities in the name and on behalf of their customers, brokers set a certain commission for these activities. Major brokers may perform as market makers and provide their customers with trading at low cost.
Assisted by brokers, private investors carry out profit-seeking activities by investing funds in Forex and exchanging currencies.
Therefore, passive market participants have to abide by the rules of the game set by active market players.
Added by Olga Vitkovskaya,
InstaForex Clients’ relationship manager